Markets Start to Speculate If the Next Fed Move Is Up, Not Down
- Interest-rate options reveal some small hedging of Fed hikes
- Pimco sees rising shipping costs as complicating Fed policy
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Investors are beginning to war-game how the Federal Reserve can manage a US economy that just won’t land, with some even debating whether interest-rate hikes will be needed only weeks after a steady run of reductions appeared all but certain.
Bets on lower rates coming soon were so prevalent a few weeks ago that Fed Chair Jerome Powell publicly cautioned that policymakers were unlikely to be in position to cut as of March. Less than three weeks later, traders have not only removed March as a possibility but May also looks improbable, and even conviction about the June Fed meeting is wavering, swaps trading shows.